1996 General Excellence Optimas Award ProfileBRMcDonald's Corp

OK, show of hands, and don't be afraid to admit it. Who, on a long road trip, that late-night munchy quest or a visit to an unknown town hasn't glimpsed the Golden Arches in the distance and felt a surge of joy usually reserved for pilgrims entering the Holy Land? It's an inexplicable, visceral sort of elation and it's nothing to be ashamed of. We need our good old standbys our Big Mac® and Filet-O-Fish® sandwiches, our Chicken McNuggets®. And McDonald's Corp. has worked for 41 years to satisfy this need: We know what to expect when we go to a McDonald's.

And there are plenty of them. McDonald's has gobbled up approximately 40 percent of the fast-food market since founder Ray Kroc opened his first restaurant in Des Plaines, Illinois. By 1963 the Oak Brook, Illinois-based chain had served its one-billionth hamburger.

The growth is truly dizzying. Every three to four hours, a new McDonald's opens its doors. More than 20,000 Golden Arches shine from Singapore to The Netherlands to Russia, with an additional 2,000 to 3,000 new stores planned a year. What does it mean to be this big, this ubiquitous, this well-known? It means you'd better have some fairly amazing people and fairly amazing HR policies to support those people. McDonald's does. From recruiting to training, from expanding worldwide to leveraging diversity, McDonald's has a people plan in place. Its on the ball HR agenda earned the company a Personnel Journal General Excellence Optimas award, which means that McDonald's excels in six of the 10 Optimas categories. These six are:

Competitive Advantage

Quality of Life

Partnership

Financial Impact

Innovation

Global Outlook.

As Stan Stein, senior vice president, HR and labor relations, says, "We're in the people business. Others can try to steal our products. They can try to steal the designs of our buildings. But the reality is we're going to win in the competitive marketplace by the quality of our people and how well we manage them, how well we create opportunities for them and how well we motivate them. If we're doing the job with our people that we should be doing, there's no one who can beat us."

The Competitive Advantage: McDonald's recruits better. Here's a fun party game: Turn down the music for a second and ask everyone who has ever worked for McDonald's to stand up. If you have a fair representation, one out of every eight people will rise. That's right, one out of every eight Americans has clocked in at a Mickey D's at some point. That's good recruiting.

Unfortunately, recruiting is a never-ending task at McDonald's: Fast-food restaurants are known for high turnover, and McDonald's isn't immune. But McDonald's does have unique recruiting strategies that help lure more candidates than many other fast-food restaurants. "We talk about alternative labor sources," says Barry Mehrman, staff director of the employment development department. "We try to get owners to think of all different ways to staff their restaurants."

For instance, two highly lauded programs go after groups that have proven statistically to be more loyal workers: older people and individuals who have physical or mental challenges.

Most older workers recruited to McDonald's are put on the payroll through ReHIREment. Thanks in large part to this program, more than 40,000 older workers serve McDonald's customers on any given day. McDonald's enthusiasm for mature workers makes great sense: Founder Ray Kroc had been a malted-milk mixing-machine salesman until he made a career change at age 52 by switching to burgers. ReHIREment was designed to ease the transition of older workers returning to the workforce or entering it for the first time. From the moment an older employee clocks in, he or she is assigned a "buddy" who works alongside the new employee for the training period. They're all offered an opportunity to advance to a supervisory position. Older workers appreciate the flexible scheduling McDonald's offers, and previously retired employees may set the number of hours they work a week so as not to jeopardize their Social Security benefits.

Joan Kelly, manager of the Business Partnerships Program for Washington, D.C. based American Association of Retired Persons, says recruiting older workers is a smart strategy. "About 11 million of our members are retired of those retired, a third of them wish they were working again, but they'd rather work part-time. They're an interesting new target group, and in many cases employers are pleased because they don't have to pay for health care and pensions. They aren't looking for benefits, they have their benefits; they're just looking to work."

In 1981, the McJobs program was founded to assist the inclusion of employees with mental and physical disabilities. More than 9,000 workers have flowed through the program. As in ReHIREment, a new employee is matched with a job coach, a specially trained McDonald's worker or state agency counselor. McJobs participants receive six to eight weeks of training, supervised by their job coaches, and are recognized with a formal graduation ceremony. Sensitivity training assists in acclimation, and McJobs employees can attend networking meetings with other McJobs workers. "They really help motivate the entire crew," says Mehrman. "The 'able-bodied' crew thinks, 'I need to do more. This person, with all these challenges, is outperforming me.'"

The result of the two programs? An entire pool of workers that often goes untapped is now successfully working for McDonald's rather than its competitors. A recent survey determined that 71 percent of managers have hired people with disabilities; more than 80 percent have hired older workers. It's a strategy that plays a key role in the restaurant's advantage over competitors. "We need to be on top of staffing," says Mehrman. "The employment competition for McDonald's day-to-day is not just all quick-service restaurants, but all retail and service industries."

Quality of Life: "You deserve a break today."One of the reasons McDonald's soars above the stereotype of your average fast-food joint is the upward mobility it offers to so many particularly minorities and women. Minorities and women compose more than 50 percent of McDonald's current workforce and these aren't just the entry-level folks taking your order:

Nearly half the restaurant's management workforce are from minority groups; half are women.

McDonald's has the largest number of minority and female franchisees (approximately 27 percent) in the quick service restaurant industry: More than 12 percent are African American, more than 6 percent are Hispanic.

The combined sales of the company's African-American owned franchises constitute the largest African-American enterprise in the United States today.

The resultMcDonald's has been featured in "The Best Companies for Minorities," earned a Catalyst Award for commitment to women's progress and was highlighted in Black Enterprise and Hispanic magazines as one of the 100 best employers for African Americans and Hispanics.

One explanation for such impressive diversity may be the McDonald's Changing Workforce Programs, formalized more than a decade ago to help employees work through gender and cultural differences and examine how they impact interpersonal and organizational results.

The courses include:

Managing the Changing Workforce

Women's Career Development

Black Career Development

Hispanic Career Development

Managing Cultural Differences and Managing Diversity.

To encourage open communication, the women's workshop is facilitated only by women executives, and the Black and Hispanic courses are headed by executives of those backgrounds.

In addition, a broad band of networks for women and minorities supports diversity. Wendy Hirschberg, adviser to the Catalyst award evaluation team, says McDonald's received the 1994 Catalyst honor in large part because of the company's women's owner/operator network. "The women had an opportunity to exchange ideas. There was a lot of good business secret sharing. They actually improved their business practices through networking and improved the bottom line," she says. In the period between 1989-when the network was started-and 1994, McDonald's saw a 300 percent increase in women franchise owners.

Also impressive was the spouse certification program, an initiative targeting women who often ran McDonald's franchises alongside their husbands but lacked the official certification as owner/operators. McDonald's wanted to ensure it didn't lose these good businesswomen after a divorce or death of a spouse. "The women [staff championing this program] would do really miraculously supportive things like fly to these wives and help them through a difficult time, help them manage the business and encourage them to join the programs that lead to official certification," says Hirschberg. "That was a powerful, extremely moving aspect to see how these women reached out to each other."

Employees' appreciation of McDonald's as an employer spans all demographic groups. When Restaurant Business magazine sent out thousands of questionnaires to find out what food-service workers thought of their jobs, McDonald's earned ranking as one of the top six Employers of Choice. Seventy-two percent of McDonald's employees surveyed gave their supervisors high marks for treatment; 67 percent have a high degree of confidence in senior management and 60 percent would recommend McDonald's as an employer to their friends. A recent internal survey saw a 10 percent rise in employee satisfaction over the few previous years. "Really our goal is to ensure our workforce is as committed as you can ever imagine," says Stein, who himself has worked under the Arches for more than 20 years. "We think the difference between us and the other folks is the commitment we're able to engender in our people."

Partnership: Good employees who are also good students.McDonald's is one of the nation's largest employers of young people. Half of its employees are students. Yet it can be a prickly relationship. McDonald's has to balance a fine line: It needs these young workers. But if their grades suffer as a result of employment, the chain either loses them immediately after parents force them to quit or loses them in the long run because they're unprepared to move up the employment chain.

So McDonald's has taken the offensive in the fight for good workers who are also good students. Some McDonald's reward good grades with salary increases. At others, college students can take advantage of a book reimbursement plan. Many franchisees even underwrite some additional hourly pay for students to study at work. A McDonald's Board of Education allows a panel of franchisees to assist in shaping McDonald's national policies on education.

The cherry on the top of all its education programs is the McDonald's Youth Apprenticeship, a four-year training program designed to prepare students for business management careers. This school-to-work program, the biggest such program yet by a U.S. company, provides a bridge between high school and a career. Lauded by Secretary of Labor Robert Reich, the Youth Apprenticeship Program is made possible by a series of partnerships with cities, states, the Department of Education, the Department of Labor and a number of educational institutions.

Participating students begin as sophomores and juniors as crew members, and are closely evaluated on such workplace skills as teamwork, self-management and mastering necessary reading, math and technology skills.

In the junior or senior year, the participant becomes a crew team leader and must demonstrate such skills as solving problems, teaching others and trouble-shooting technology. Finally, during the senior year or upon high school graduation, the student becomes a swing manager, learns to use computers, demonstrates leadership and acquires TQM training.

But work training is complemented by classroom training. McDonald's partnered with Northern Illinois University to create high school curriculum that covers skills needed in the food-service, retailing and hospitality industries. "I wish you could experience what I've experienced sitting in a classroom and seeing what I'm going to call 'average' students have the light bulb go off that there's an opportunity," says Stein. "It's rewarding from that standpoint, but it's also rewarding from a business standpoint because we produce some terrific quality folks."

Upon graduation, the combination of classroom and work instruction qualifies students to become first-level supervisors at McDonald's, HR hopes. The program has been so successful, it's expected to grow to 3,000 students at 102 high schools by 1997.

Financial Impact: Employees train to get better and better.You'd probably guess that at a company as huge as McDonald's, training plays a key component. You could say that: McDonald's surpasses even the U.S. Army as the nation's largest training organization. The training is good enough to develop your basic burger-flipper into a management employee-saving money in both turnover and recruiting. More than 60 percent of McDonald's restaurant managers started as crew; more than one-third of McDonald's franchisees started as crew; and more than half its middle and senior managers started in its restaurants. "We provide career opportunities," says Stein. "When we hire someone, we put in such an investment in training and developing them that we want them to stay with us for their careers, as long as they maintain their enthusiasm, the fire in the belly... Our competition for the most part turns 'em over every two or three years. Anyone who has been there three or four years is someone who's looked on as being an old-timer. We have a great deal of longevity. We respect it; we reward it. It doesn't pay for us to spend all that time and effort and then see them turn over."

Most basic but effective training is the McDonald's Service Enhancement process. This program reminds crew that it's the customer who defines what exceptional service is and empowers the crew to do whatever it takes to satisfy customers. That's a big change of pace for many entry-level workers, and it has paid off in significant sales increases since its introduction.

Then there's the Management Crew Training Program, an intense learning segment for new hires. The new kids work shoulder-to-shoulder with crew trainers while they learn the operations skills necessary for running each of the 25 workstations in each restaurant from front counter to grill.

The McDonald's Management Development Program (MDP) picks up at the point crew training leaves off, developing a cadre of future leaders. Conducted at regional offices and corporate training centers across the country, MDP gives people at each of the five levels of management positions-from swing manager up to restaurant manager-the technical and functional management skills needed for work at McDonald's.

First-assistant managers earn the opportunity to then head onto the biggest and best training -- McDonald's version of college, Hamburger University®.

Innovation: A Bachelor of Hamburgerology degree raises the bar.It might look a little odd on a resume, but at McDonald's, graduation from the "Harvard of Hamburgerdom," Hamburger University (HU), is no laughing matter. Initiated in 1961 in the basement of a McDonald's restaurant, the university was intended to keep McDonald's employees reading off the same page as expansion exploded. So key is it to the restaurant's success, the university has been relocated since 1983 to 80 bucolic acres in Oak Brook, Illinois, to allow for more students to attend. HU now comes complete with a state-of-the-art learning facility and a 220 room hotel operated by Hyatt Hotels.

Currently, franchisees and employees with two to four years of in-store experience are required to attend HU-which is accredited by the American Council on Education-before becoming managers. So each year, up to 3,000 employees from nearly 100 countries enroll for the two-week Advanced Operations Course.

This isn't 14 days of sloshing shakes and flipping fries. These "students" already have 1,500 to 2,000 hours of training under their belts from McDonald's other programs. They know the basics. At HU, each class of 150 to 200 employees studies the finer side of supervising, such as team building and interpersonal and management competencies. "McDonald's has a culture of its own," says Stein. "We try to ensure that culture perpetuates itself. By having a central training facility where everyone at a point in his or her career comes together, we're able to share the McDonald's culture. Whether folks are in France, Germany or the United States, they have a common McDonald's language, a common McDonald's culture and even if their country culture is a little different, they can totally relate to each other."

The curriculum is 80 percent devoted to communications and human-relations skills. With 30 resident professors, students go through interactive testing, auditorium lectures and role playing with simulations revolving around the "real life" of management: the good employee with people problems, the scheduling crisis, the culture clash. They also cook up some time in the kitchen labs. Since about half of HU students are from outside the United States, the classrooms resemble a United Nations assembly: Between interpreters and translating equipment, professors can communicate in 20 languages. More than 50,000 students have received their degrees in Hamburgerology.

Global Outlook: Supporting an ever-expanding company.You try to keep a hold on HR in 100 countries while developing another five or six a year. It ain't easy. But Stein, who has HR responsibility on a global basis, gives it his best. On his side is the fact that all employees in all countries have the same "ketchup in their veins," as McDonald's workers are fond of saying. Meaning, the restaurant's basic HR philosophy remains fairly stable from operation to operation. Stein estimates that about 80 percent of McDonald's HR policies are transferrable among all countries.

That's not to say HR isn't always on the lookout for better practices. To keep up on new developments, Stein and other HR professionals do a lot of traveling to different countries to exchange ideas. An HR "board of directors," comprising key HR people from around the world, regularly meets to share best practices, set goals and plot strategies. In addition, Stein works with a group of consultants that travels the world-one member representing Asia, another the Middle East, another Europe and so on. These consultants work with his or her country's managing directors to ensure local HR people are integrating the necessary HR strategies.

To further ensure the countries are connected, Stein hosts a worldwide biannual HR convention (this past summer's was in Toronto) where all HR people from around the world meet for a week of training, development and motivation. The basic approach to global HR is to gather the best policies no matter where they come from.

As for global recruiting, this is often a smooth run. Overseas, McDonald's has earned a reputation as an excellent employer. When the chain opened its first restaurant in Moscow, it received more than 25,000 applications. Australia's government recognizes McDonald's as being its "employer of first choice" not just for the restaurant industry, but among all employers there. It's not uncommon to see help-wanted ads Down Under offering preference to former McDonald's employees.

But enthusiasm for McDonald's isn't just limited to crew jobs. In fact, McDonald's is able to hire many high-level, host-country professionals although expat assignments are encouraged, U.S. professionals usually return home after the start-up operations are complete. "We really want our countries run by local nationals," says Stein. "We have very few expats for a company our size. A local national who's steeped in the values of McDonald's, who understands the country and the people, can, frankly do a better job for us in the long run than an American.

1997: A big HR year.McDonald's, with its expansion plans of developing five or six countries a year, with 2,000 to 3,000 stores built a year, won't take long to hit the 30,000 restaurant mark. The HR question: How to evolve so it continues to provide top-of-the-line people support? The answer is called "HR regeneration," in development in 1997 with a roll-out date for 1998.

The strategy has three parts. First, a "solution center" will take over HR transactions. But this solution center will also include a consultative piece. When management people have questions about a particular HR venue, they can access the Internet and Lotus Notes for just-in-time information and training. If this doesn't solve the issue, management then can go straight to the company's HR experts. If it's a staffing issue, they can access the top staffing people. They'll deal directly with the best of the best in all the HR areas: compensation and benefits, operations, staffing and so on.

The second piece is creating "business partners." These people will work with management, taking all business strategies and interpreting the implications from an HR standpoint.

They then work with people in the third area, the "design center," to ensure HR's new systems and processes are addressing the business's needs. The design center's cross-functional HR team creates the new systems and processes to support the business goals.

"If we're going to stay ahead of the game, we've got to be looking forward this way," says Stein. "That way we can manage 40,000 or 50,000 stores as well as we manage 20,000." With McDonald's serving up this kind of HR excellence, that goal seems quite achievable.

Personnel Journal, December 1996, Vol. 75, No. 12, pp. 46-53.

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